Major Week For Markets
Sometimes Decades Come Down to Just One Week
Magnelibra cannot stress enough the significance of this week for our financial markets. While many in the U.S. are out enjoying summer activities (where allowable) and with Europe looming on their annual month long hiatus, we can’t help but emphasize the major importance of the slew of data and information that arrives this week.
First up we have our markets overlord meeting, the Federal Reserve Board, slated for a two-day meeting on the 28th and 29th. There isn’t any notable rate change expected, but we should see continued market support, as well as the “do all we can” rhetoric continue.
The FED has told us time and time again, they are ALL IN and combined with fiscal initiatives, will continue to push this mantra. The Fed will give forward guidance on the 27th to any changes to their tentative U.S. Treasury (UST) & Mortgage Backed Securities (MBS) purchases.
Here is some data regarding their current QE schedule totaling
$80Bn per month in USTs
$47.6 Bn in MBSs purchases just in the time frame from July 14th-27th, and we have to note that this is well above their so called $40bn a month guidance:
We also have this week some major earnings to be on the look out for. Yes we know all the earnings guidance have been slashed but the reality is and as FactSet has recently noted:
The blended earnings decline for the second quarter was -42.4% as of Friday, with this metric combining both the actual results for companies that have reported along with estimated results for companies that have yet to report, which marked an improvement from last week, when the blended earnings decline was 44.1%.
If -42.4% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings reported by the index since Q4 2008 (-69.1%).
Obviously we are keying on the Tech companies to report, most notably Facebook, Apple, Amazon, Alphabet. These big dogs are the market leaders and offer a combined market cap currently of $4.8 Trillion dollars!
Here are their performances thus far YTD, let’s also consider the global economies have been shut down and the only factor we look at is QE, so these numbers aren’t a real surprise to us, but many will continue to be amazed how far QE can go:
FACEBOOK +12.40%
APPLE +26.16%
AMAZON +62.83%
ALPHABET +13.08%
We will try to provide some optionality play’s for our Founding Subscriber base oh and speaking of, last week we highlighted potential for the CMG $1100 put option play for $15 a few days before earnings. This option had a Friday expiration but was mainly an “earnings play”. However the earnings didn’t significantly hit the equity, but here is what did transpire:
We want to educate our readers on how a professional trader would approach this. If we allocated the $1.5k to purchase the put, that was our risk capital. Now Chipotle on Friday dipped to a low of $1096. A trader knowing his capital is at full risk could have bought a full delta amount of CMG stock at $1100 and been long the stock outright from the strike level.
CMG rallied the rest of the day to close at $1130. So let’s break down this play to see how it may have transpired for a trader that bought in the CMG equity at the strike of $1100 and exited the equity on MOC on Friday:
11/21/27 Purchase $1100 put for $15.00 ($15.00 x $100) = $1,500
11/24/27 Buy 100 shares (full delta) of CMG at $1100
11/24/27 Sell 100 shares (market on close) at $1130 = ($1130-$1100) x $100 = $3,000
P+L = $1100 put expires worthless = -($1,500) + MOC shares sale net of $3,000 = +$1,500 profit - commissions
Now, understand that many people will never pull the trigger on buying the equity in there, as the 99% crew would most likely think the market could continue to fall and focus too much on that $1085 B/E level as their buy zone. (Difference between amateur and professional) However Magnelibra is here to educate you on an example of how two people could put on the exact same trade and one will lose money, the other will make money and this is why!
So we will try to highlight a few of these plays this week for our equity followers. Despite being a Commodity Trading Advisory, Magnelibra the owner of this Econemotion letter understands the diversity of our readership and we want to cover as much of the investing community as possible.
As much as the regulatory bodies deem what we do “alternative” the reality is given the nature of our current financial system, everything is risk now and all investing should fall into the category of “ALTERNATIVES” because the combination of central bank support and negative interest rates makes everything miss-priced and full of unwarranted risk.
This letter is getting too long and thus we are going to end it with our last thing to watch this week, Thursday’s Q2 GDP number. Here is the Atlanta Fed model predicting a decline of -34.7%:
So with GDP on Thursday morning alongside Apple, Amazon and Alphabet earnings, well we hope you get the picture and with a Nasdaq chart set up like this, well the BTFD crowd sure hopes someone comes up with something big, or else, expect the BEARS to come crashing in!
OK that is it, as we noted only official Founding Membership subscribers will be receiving Magnelibra’s Global Futures Benchmark Program Positions Tracker, as we have stated the quantitative efforts and years that went into creating it are invaluable and we know it. So think about taking the step, you will not be disappointed and we will continue to provide quality content and direction to our regular subscribers and free sign ups. The regular subs will always get our daily settlements page and access to daily updates of market moving items and charts. The free sign up’s will have access to daily free posts when we put them out. Please feel free to share our work and subscribe below cheers and Happy Summer, things are heating up literally and figuratively, good luck, take a break, enjoy what you can, when you can and realize the markets will always be here willing and waiting! We want our readers to at least share this with one other contact, we would greatly appreciate it.
For those that aren’t paying subscribers, if you want to continue to have access to updates like this, we highly suggest you:
-Magnelibra Econemotions
DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options on neither commodity futures. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of, or from the author Michael Agne owner of Magnelibra Capital Advisors. All rights are reserved. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, we make no warranty, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed.